Last night when the National Association of Insurance Commissioners voted by a bare majority to back an insurance industry plan to gut health insurance price protections in the federal health reform, Consumer Watchdog went nuts on the association. It was especially galling that brokers kept insisting it was for the good of consumers, that they only intended to preserve our ability to get their "professional advice." It was even worse that 26 out of 52 commissioners present kept pretending to believe that fabrication and voted in favor of the broker lobby. As the North Carolina insurance commissioner put it, almost tearfully, “Our agents on Main Street in rural areas are very fearful of what a quick transition will do to their ability to provide counseling services,”
Read our news release to see why that argument is entirely false.
The NAIC's resolution urged Congress and the White House to gut the only real consumer pricer protection in the Affordable Care Act. That protection, the "medical loss ratio" rule, requires insurers to spend 80% to 85% of their premium income on health care, and limit overhead, commissions and profit to 15% to 20%. The idea is to get insurers to operate more efficiently and cut bloat to keep premiums down. It's already working–for instance in Connecticut, where regulators report major insurers filing for premium reductions, not increases.
Such relief will be over if Congress or the White House do what the NAIC asked–to remove broker sales commissions of a few percent up to 20% of the premium from the overhead percentage. Premiums would shoot up, profits would grow and consumers would pay.
Consumer advocates are counting on the White House and Congress (at least the Senate) to reject the fake arguments and arm-twisting of the industry, and listen to actual consumers.
Insurance companies have been trimming some sales commissions since about 2006 for their own business reasons, but don't cry for brokers. A confidential California study found that sales commissions rose 300% in the last decade, piggybacking on the rise of insurance premiums. So the argument that consumers would be unable to find brokers and get their "professional advice" if commissions were trimmed back never passed the laugh test. In fact, states that already restrict insurance overhead repeatedly told the NAIC they had no shortage of brokers and agents.
The brokers just wanted to stay fat, and insurance companies wanted to kill the medical loss ratio rule. They had just enough influence and clout at the NAIC to do it.
The only praise for the NAIC's vote on behalf of the industry came from, no surprise, the broker lobby, which continued to insist it was only trying to protect consumers' "access" to its salesmen. Gag me.